UABA News Blog - In English

This UABA Blog page provides information and commentary on issues that are relevant to the organization and its members. Although the blogs are public, comments can only be made by members. If yoiu wish to join the discussion, you are welcome to become a member.

The comments expressed on these blogs represent the opinions of the authors and not that of the UABA.

BY Armen Khachaturyan, Senior Partner, Asters Law Firm, Kyiv
On 15 November 2010 the National Bank of Ukraine (the "NBU") issued an official clarification letter (the "Letter") regarding the currency restrictions applicable to payments by Ukrainian sureties and guarantors to foreign creditors under guarantee (garantiya) and surety (poruka) agreements. In the Letter the NBU explained that in order to make a payment to a foreign creditor a Ukrainian surety must obtain an individual license from the NBU unless the surety is an authorized bank or financial institution.
At the same time Ukrainian banks can make payments as guarantors or sureties without an individual license. Non-banking financial institutions do not need an individual license for such payments if they have a general license for transactions with foreign currency. Read Article http://www.asterslaw.com/upload/medialibrary/newsletters/asters_newsletter_eng_23_11_10.html

Unfortunately, when doing business in Ukraine, foreign and Ukrainian companies are often faced with requests by public officials to provide “contributions,” “facilitation payments,”or worse, in order to accomplish routine work. Western companies are familiar with these issues as well as Ukrainian requirements. However, as of January 1, 2011, Ukraine’s legislation is significantly changing – for the better – in tackling these problems. Finally, the scope of corruption practices and prohibitions in Ukraine has been expanded, in large part because of Ukraine’s international obligations stemming from the UN Convention against Corruption and the Criminal Law Convention on Corruption, which Ukraine ratified in 2006.

Steve Grogoza, a well known criminal defense lawyer in Naples, FL – and UABA Board of Governor’s Chairman --- successfully argued that his Spanish speaking client was denied his Miranda Rights as a result of translation errors during questioning by police. Grogoza contended that a detective not only translated the conversation inaccurately but that investigators had deceived the suspect by promising his confession would be heard by no one outside of the room.

I.BackgroundUkraine adopted its Constitution on June 28, 1996. This document exclusively tasks the court system with the administration of justice, according to Article 124, and judicial proceedings are to be held before the Constitutional Court of Ukraine and the courts of general jurisdiction. Under Article 125, the Supreme Court of Ukraine is the highest judicial body for courts of general jurisdiction, while the “respective high courts are the highest judicial bodies of specialised courts.” Elsewhere in the Constitution, Article 126 sets nine different events that allow the removal of a judge, and that article also guarantees the independence and immunity of judges. The people participate directly in the administration of justice as jurors and people’s assessors.

Ukrainian Education Ministry disapproves 'Russophobic' law textbook The Ukrainian Education Ministry has withdrawn its recomendation of "Russophobic" legal studies textbook written by professors at the Shevchenko Kiev National University , Education Minister Dmitry Tabachnik said. The textbook, entitled "The History of Ukrainian Law" and written under the editorship of the dean of the university's law department, previously received approval from the ministry for university study, despite criticism by some experts that the book contains controversial material aimed at sparking hatred towards Russia.

This week, American media reported that the Yanukovych government of Ukraine instituted litigation in the United States and in England claiming that during the tenure of Julia Tymoshenko as Prime Minister, Ukraine was defrauded of nearly 1/2 billion dollars. [LA Times,PR Newswire,WSJ] allegedly, the misappropriation occurred between January of 2008 and January 2010.

In the Oregon case, the Ukrainian government charges that a scheme existed to overcharge Ukraine for vaccine purchases and divert the illegal markups. The complaint describes the wrongful activities as follows;

This action arises from the fraud perpetrated by Defendants Olden Group, LLC ("Olden Group"), a company founded and headquartered in Oregon, and Interfarm, LLC ("lnterfarm"), a Ukrainian company, against the Ukrainian state-owned enterprise Ukrvaktsina. Interfarm and Olden Group conspired to overcharge Ukrvaktsina for millions of dollars in vaccine purchases through acts of fraud, money laundering and other criminal acts. Olden Group and Interfarm carried out their scheme by, among other things, submitting false invoices and customs declaration forms and entering into sham contracts with each other, all for the purpose of deceiving Ukrvaktsina. The Defendants' misconduct is pervasive and ongoing. ……

Plaintiff Ukrvaktsina procures vaccines for the people of Ukraine and distributes vaccines to health clinics, hospitals and the general population in Ukraine. Defendant Olden Group is an import/export company that, among other things, purports to distribute vaccines. Olden Group works with foreign companies, such as Interfarm, to charge illegal mark-ups that were either not authorized by Ukrvaktsina or were authorized unwittingly as the result of fraud.

The Tymoshenko camp has denounced these allegations and any claims of wrongdoing stating that this is a mere smear campaign against her and was initiated for political reasons. They point to the fact that the attorneys on the complaint, Aiken Gump, had represented Ukrainian oligarchs from Yanukovych’s Regions Party in the past. Needless to say, Aiken Gump denies the motivations attributed to it. However this firm does represent Ukrainian and Russian companies and businessmen and one of its specialties is to “clean” the images its clients.See The American Lawyer, October 2009.

It is noteworthy that the complaint was filed little over a month before the October 31st local elections in Ukraine and shortly before Julia Tymoshenko’s visit to the United States later this month. Obviously, this litigation will be a prominent issue in both events. Also, Victor Yanukovych took office in February of this year. The necessary factual investigations which are the basis for the Oregon litigation in all probability required more than nine months to complete. If so, then who initiated the investigation during the presidency of the Yushchenko? Was it a Regions party supporter or a disgruntled Orange Revolution politician? Only time – and the discovery process – will tell!

As the summer solstice approached, I visited Ukraine to attend the World Congress of Ukrainian Jurists’ seventh “biannual” conference [the last one occurring in 2002??]. The weather was blazingly hot, setting new records for Ukraine.During the course of 10 days, I had the opportunity to meet with a wide spectrum of Ukrainians that ran the gamut in age, social and economic position, and political affiliation. Despite the scorching heat, one could feel a cold, frost laden wind blowing from the north chilling the spirit of many Ukrainians -- this chill was as a result of the most recent presidential elections and the northward political steps being taken by the new administration. One of the major efforts of the new presidential administration is to have its loyalists assume control positions not only at all levels of civil government, but also in professional organizations from the international, national to even the municipal level.

Although much can be said about what I discerned, my observations can be summarized as follows.

One; the older generation -- 45 years old plus -- which grew up under Soviet rule, still recalled those past repressions and seemed to have surrendered to what they felt was the inevitability of fate. 20 years of progress -- in Hegelian fashion -- were reverting back to repressions of the past and the inertia of this process was predestined.

Two; the middle generation -- 25 years old plus -- who were at the barricades on the “Majdan” during the Orange Revolution, displayed feelings of enormous disappointment and openly verbalized that their efforts were in vain. They now have young families and their prime objective was to secure their families’ immediate well-being and not chasing Pollyanna ideals. They could no longer risk altruistic efforts to achieve political reform which they believe would probably result in the same disenchantment as did their past efforts.

Both these generations exhibited very deep and bitter resentment towards the Orange Revolution leaders for wastefully squandering historic opportunities to improve the daily lives of Ukrainians and to degenerate and stoop to petty personal political squabbles to achieve individual opportunistic and selfish objectives at the expense of national interests. The “Majdan” generation expressed their belief that future political reform, or at least maintaining the level of freedom achieved to date, will fall on the shoulders of the 25 year old and younger generation. This generation did not experience soviet repression and were too young to be participants in the Orange Revolution and thus did not suffer such strong disappointments at its failure. Not having experienced a lack of personal freedoms that they have now, this 25 and younger generation may well be the one which will thwart any restrictions placed upon these freedoms.But what this generation may still need is a few years to ripen into their historic role. I had the opportunity of visiting a law school in Kyiv and meeting many young students. I am of the opinion that the above assessment as expressed by older Ukrainians is correct and it is this group that we in the Diaspora must concentrate upon.

The chilling effect presently being felt by Ukrainians can best be demonstrated by the events at the World Congress of Ukrainian Jurists or what one may call cirque ukrainien de juristes.

As we all know, this organization has been dormant for the past 12 years under the leadership of Valeriy Yevdukimov and has failed even to attempt to achieve objectives that we expected at its birth in 1992.The passing of this organization into historical oblivion would not have been mourned. Recently, however, there was an effort within Ukraine and its legal circles to revive this entity and to attempt to put it back on course. Towards this end, in April of 2010, Valeriy Yevdukimov [from the Regions Party] was persuaded to immediately hand over the reins of the World Congress to Mykola Onishchuk [Minister of Justice in the Julia Tymoshenko government] whose objective was to create a more balanced membership with all professional legal organizations having access to participate in the World Congress and its governing body.The Ukrainian Union of Jurists [headed by Valeriy Yevdukimov] unanimously approved this transition and a convention of the organization called for June 17 to approve this transition. With this objective in mind, the UABA sent a delegation [A. Steckiw, P. Kostiw, and M. Smorodsky] to assist in this transition of power. Unfortunately, no Canadians, other than one ex-pat living in Kyiv, physically participated in the conference claiming short notice with I. Bardyn and representatives from other countries giving proxies to Danylo M. Kurdelchuk.

Unfortunately, what was unanimously agreed to by the Union of Jurists in writing in April and acted upon in good faith by everyone else was in the last minute totally reversed -- apparently on orders from higher authorities within the new presidential administration. The day before the convention was scheduled to occur, Valeriy Yevdukimov was almost “unanimously” asked by the delegates of the Union of Jurists to recall his resignation and to renew his candidacy for president of the World Congress again.

Once we learned of this turn of events, and recognizing that the vast majority of delegates at the World Congress were loyal supporters of Valeriy Yevdukimov, the UABA delegation [together with the handful of Ukrainian reform minded lawyers] advised the governing body of the World Congress that the UABA would walk out if the prior representations, which were the basis of our mandate, were not complied with.Our actions – if acted upon - would in essence kill any semblance of internationalism of the organization and leave it merely as an appendage of the Ukrainian Union of Jurists. We also expressed, in very straight forward terms, our displeasure at the lack of activity of the organization in the past, the obvious improper political pressure being exerted, and that our threats to walk were not mere idle chatter.

The reform minded Ukrainian lawyers on the World Congress board, Mykola Onishchuk and Danylo M. Kurdelchuk, proposed to the UABA delegation a compromise: the World Congress general meeting would take place but all elections would be scheduled to occur by June 1, 2011 with Valeriy Yevdukimov continuing as its president and general membership would be open to other legal professional groups in Ukraine. Despite my strong desire to kill the dormant entity, we reluctantly agreed to the compromise to give the Ukrainian reform minded lawyers an opportunity to regroup and try one more time to reform the entity.Even though this apparent “compromise” was agreed to by everyone, we anticipated further shenanigans from the Union of Jurists -- and we were not disappointed!

On the day of the conference, June 17, and after the usual introductory speeches, reports on the compromise, and scholarly lectures [mine is attached in Ukrainian and English] Valeriy Yevdukimov’s delegates began a barrage of motions from the floor to put the elections back on the agenda and to immediately reelect him as president for another term. Professors of law whom I have known for many years and who I expected would be pro-reform -- or at least supportive of the compromise -- turned and ran like scared rabbits before a hungry wolf echoing support for the Yevdukimov motions from the floor.The UABA delegation was seated on a higher platform in the hall and merely observed the “circus of jurists” and started slowly to pack its papers preparing to leave. A break in the conference was called and Danylo M. Kurdelchuk spoke privately with Valeriy Yevdukimov and his leadership. Reportedly, he basically said “the Americans are not f---ing around, if this circus continues they are out of here and so are we -- with the appropriate press releases.” [See attached press release in Ukrainian that was ready to go] Needless to say, all Yevdukimov motions were quickly withdrawn and a resolution approving the compromise was unanimously accepted.

It is noteworthy that the vast majority of delegates were from the older generation, the Union of Jurists having excluded over these many years younger more progressive young lawyers and their organizations.

The UABA has now certain choices that it can take vis a vis the World Congress:

One: The UABA can ignore the World Congress as it did in the past and as did the Canadians and others in the Diaspora.This will merely continue the illusionary façade that the World Congress is a real international organization and give a platform for its present leadership from which to trumpet its alleged importance.

Two: We can try to kill the entity now by resigning.This unfortunately, will not have any PR effect in Ukraine whatsoever and the artificial facade can merely continue in Ukraine.

Three: the UABA can work with reform minded lawyers in Ukraine and try to put the World Congress back on the right track.If we fail in one year, we can kill it then with the appropriate and more effective fanfare.The reform minded Ukrainian lawyers have expressed their appreciation of the UABA’s efforts at the most recent conference as is evidenced by the attached letter from Mykola Onishchuk.

There is an old saying “You cannot win the game if you are not in the game!”It is my strong recommendation that the third option be followed by the UABA. However, we need to take certain steps in preparation for the next conference.

•·Reestablish communications with the other reform minded lawyers groups in Ukraine to make certain that they are able to take part in the next World Congress conference.

•·Communicate with our lawyer brethren in the Diaspora so that we have a coordinated effort and wider participation in the World Congress.

•·Pressure the existing leadership of the World Congress to take steps and undertake activities that would reinforce the concept of the rule of law in Ukraine by actions rather than empty words.

•·In anticipation that the northern chill will continue in Ukraine and may ultimately cause the frostbitten demise of the World Congress, the UABA should quickly develop and undertake alternative programs aimed at the under 25 generation that will help this generation to maintain those freedoms that have been achieved to date.

The UABA has a choice: we can leave the Ukrainians to withstand the slings and arrows of outrageous fortune by themselves; or we could try to help them defend against the cold wind that is blowing from the north – I would respectfully suggest the latter.